Inter-firm Variations Research Articles

Firm-specific knowledge and technical efficiency of watch and clock manufacturing firms in China

This paper tests whether firm-specific knowledge in terms of capital intensity, product differentiation, and research and development contribute to an improvement in firm efficiency. Based on a representative dataset from the watch and clock industry in southern China, the technical efficiency is estimated using a non-parametric data envelopment analysis approach. Through a Tobit model, we investigate whether a firm's specific knowledge influences its efficiency. The results suggest that capital intensity and research and development have a positive effect on the efficiency of the sample firms, and identify their roles of firm-specific knowledge in explaining inter-firm variation in efficiency. However, sample firms with high level of product differentiation were found to have no obvious advantages in efficiency performance.

Sickness Absence: An International Comparison

This paper shows how internationally and intertemporally consistent information on sickness absence can be constructed from Labour Force Surveys, and describes some important features of data that we have generated using the Luxembourg Employment Study. We also analyse sickness absence rates by age, gender and other socio-economic characteristics of workers. These relationships prove to be similar across countries with widely differing mean rates of absence. In this dataset, workers with longer tenure tend to have higher absence rates even when age is controlled for. Absence is also positively correlated with higher usual hours of work. We show how internationally and intertemporally consistent information on sickness absence can be constructed from Labour Force Surveys (LFS), and describe some important features of data that we have generated using the Luxembourg Employment Study (LES). Such data fill an important gap in available information about absence, since they have the potential to provide answers to a number of issues that remain unresolved in its study. There is now substantial evidence, going back to the work of the Industrial Fatigue Research Board in the 1920s and 1930s,I that sickness absence is not purely a response to a medical condition. Workers who have access to compensation payments are more likely to be absent than those without (Buzzard and Shaw, 1952); the higher the rate of compensation, the more absences workers are likely to take (Buzzard and Shaw, 1952); furthermore, the higher the rate of compensation, the longer absences are likely to be (Barmby et al., 1991). The analysis of sickness absence is placed firmly in the agenda of economics by the idea that sickness absence rates are the consequence of choices that can be mediated by financial (and other) incentives. The provision and level of sickpay is typically determined at two levels: by negotiation between firms and their workforces, and by government regulation. Interfirm variations in absence and their correlates are not well understood. Coles and Treble (1996) have argued that the marginal cost of an absence is partially in the control of firms, and can be usefully seen as driven by the nature of the technology adopted. These theoretical arguments remain largely unexplored empirically, but the ability to compare similar industries across different countries is likely to be revealing. * This paper was drafted during a visit to CEPS/INSTEAD in the Summer of 1999. The research was funded by a grant of the European Commission under the TMR Programme, Access to Large Scale Facilities, hosted by IRISS-C/I at CEPS/INSTEAD in Differdange, Luxembourg. We are also grateful for support from the Leverhulme Foundation through a grant to the Institute for Labour Research at the University of Essex and to colleagues at the ILR for their constructive comments. Acknowledgements to LES data providers are given at the end of the paper. We would also like to thank Paul Alkemade, Elena Bardasi and Pascal Garin for their help. Any remaining errors are our own, and the views expressed herein are not necessarily those of CEPS/INSTEAD. 1 See, for example, Vernon and Bedford (1928).

How Late to Pay? Understanding Wage Arrears in Russia

We organize an empirical analysis of Russian wage arrears around hypotheses concerning factors that create incentives for firms to pay late and for workers to tolerate late payment, both reinforced by a prevalent environment of overdue wages. Our analysis draws upon nationally representative household panel data matched with employer data to show substantial interfirm variation with the probability of arrears positively related to firm age, size, state ownership, and declining performance. Estimation of a constrained multinomial logit model also reveals intrafirm variation related to job tenure and small shareholdings in the firm. Workers tend to have higher arrears in rural regions with low hiring rates, concentrated labor markets, and more prevalent arrears in the past. We argue that wage arrears, unlike wage cuts, have a theoretically ambiguous effect on workers' quit behavior, and we show empirically that the effect varies negatively with the extent of the practice in the local labor market.

Intra-firm Allocation of Organizational Effort: Inter-firm Variations in Indian Industry

The degree of organizational efficiency of a firm is a crucial determinant of its business success. But, organizational efficiency itself is dependent on the level and effectiveness of the organizational effort spent by the firms. This paper by Rameshan and Trivedi, therefore, attempts to examine the inter-firm variations in the intra-firm allocation of organizational effort. It also focuses on the effectiveness of the effort allocated to different areas of action which is required to tackle the scores of inefficiency elements prevailing in the firms.

Technology, firm size and export behaviour in developing countries: The case of Indian enterprises

This article analyses the interfirm variation in export behaviour of Indian enterprises in 13 manufacturing industries using Tobit models. The main contention of the analysis, which is supported by the empirical findings, is that the technology factor could be important for explaining export behaviour of developing country enterprises in medium and low technology industries. The firm size ‐ export performance relationship is found to be predominantly inverted U‐shaped. A higher level of automation is an advantage only in high technology industries. In countries with large home markets government negotiations with MNEs regarding export obligations could be an effective means of expanding manufactured exports.

Cooperative research in a newly industrialized country: Taiwan

Partly triggered by the successful experience of the Japanese VLSI program, Taiwan has launched several cooperative research projects, aimed at enhancing industrial competitiveness. These undertakings, however, have not performed as well as expected. Under such circumstances, the Taiwanese government is anxious to explore which factors affect the inter-industry and inter-firm variation in cooperative research activity, and to evaluate the feasibility of such R&D cooperative projects. Our analysis suggests that the more research active the industry is, the greater is the proportion of those funds allocated to cooperative arrangements. And foreign competition is the principal factor which influences a firm's decision to engage in cooperative research activity. Furthermore, we conclude that Taiwanese firms should look beyond their own R&D as the major source of new technology and become involved in cooperative research. The reasons for such a necessity are due to the accelerating pace of technological change, scale barriers in high-tech industries and Taiwan 's small and medium-sized enterprise, dominant status in the industrial structure. However, a compromise which allows research goals to fall in the middle ground between research-oriented and product-oriented measures is advisable to match Taiwan's current environment. In addition, implementing a new cost-sharing principle and an appropriate incentive scheme to improve research efficiency in government-led cooperative programs are urgently needed.

Vintage capital, market structure and productivity in an evolutionary model of industry growth

This paper examines the effects of inter-firm variation in vintage equipment replacement policies on industry productivity and structure using an evolutionary model based on Nelson-Winter. Traditional industry productivity measures assume a graduated replacement policy with low variation across firms in the average age of the capital stock. This approach allows for inter-firm policy variation. The first part reviews the neoclassical treatment of vintage capital investment; the second part outlines an evolutionary model of vintage replacement in the context of industry growth; and the third part presents results of simulation experiments focused on the relationship between vintage replacement patterns and industry productivity growth. Findings suggest that inter-firm differences in vintage capital investment policies may account for significant shifts in the rates of industry productivity growth and changes in market structure.

New technology adoption in US telecommunications: The role of competitive pressures and firm-level inducements

In this study we examine the reasons for the differential adoption levels of a new technology, that of electronic switching, across firms in the US telecommunications industry. Using theoretical postulates from the market-structure inducements approach to firm behavior, and the behavioral theory of the firm, we propose that the incentives to adopt a new technology are positively related to the competitive pressures faced by a firm in its micro-market, negatively related to past levels of performance, and positively related to slack availability. Our sample consists of 40 of the largest firms in the industry. We use firm-level data collected for the years 1973, 1978, 1981, 1984, and 1987, and the results indicate strong support for our proposition. Our findings show that, in general, market effects via the mechanism of competitive pressures generated are strong in explaining inter-firm variations in levels of technology adoption in the period since moves to deregulate the industry began; however, the firm-level effects are equally strong, if not stronger, in explaining such variations both in the period leading up to the commencement of deregulatory moves and also immediately thereafter.

Small enterprise and firm-level technical efficiency in the Indonesian garment industry

This paper examines technical efficieny in the Indonesian garment industry, based on the country's 1986 Census of Small Industry. Drawing on a sample of 2250 firms, our analysis suggests that inter-firm variations in efficiency are very considerable. The paper then investigates the correlates of these variations finding, in particular, a positive correlation between technical efficiency and each of export orientation, financial integration and female participation in the workforce. It is also found that there is a significant level of labour–capital substitution in the industry.

The Formation of Key Marketing Variable Expectations and Their Impact on Firm Performance: Some Experimental Evidence

The expectation formation process has been extensively studied by economists, particularly for macroeconomic variables. However, no prior research has examined how expectations are formed and used in the context of marketing forecasting. In this paper, we use data from a simulated competitive environment (1) to examine the expectation formation process for important marketing variables such as market size, number of competing products, and average industry price, and (2) determine how inter-firm variation in the formation process affects performance. Using the Rational Expectations Hypothesis as a framework, we find that decision-makers' forecasts tend to be efficient, i.e., utilize all relevant available information, but are biased. Other key findings suggest that degree of firm rationality in the forecasting process as well as the level of forecasting accuracy are positively related to performance.

Market Structure and the Profits of the British African Trade in the Late Eighteenth Century: A Rejoinder Rebutted

In his rejoinder in the September 1983 issue of this JOURNAL to our comment on his article that appeared in December 1981, J. E. Inikori claims that we fail to address effectively any of the six major points raised by his article. We confess that we did not respond to his arguments about temporal fluctuations and interfirm variations in profit margins, largely because we regarded such arguments as commonplace and the subject of little debate among historians. We do have doubts, however, about Inikori's attempt to relate profit margins to the size of firms in the trade, as we indicate below. The main concern of our comment was with several more questionable assertions made by Inikori about the market structure and general profitability of the slave trade, and we sought to challenge these. Our criticisms centered on Inikori's classification of British slaving firms, his analysis of the elasticities of supply of trade goods and export credit, his method of calculating profits, and his interpretation of the career of one Liverpool slave merchant, William Davenport, for whose ventures we have exceptionally detailed accounts. Inikori's Rejoinder rejects all of our criticisms, but the arguments he advances remain conceptually unsound and rely upon questionable interpretations of slender evidence. We propose to deal only with the main points of our criticisms that Inikori either misunderstands or still fails to meet.

Effects of Federal Support on Company-Financed R and D: The Case of Energy

For decades, policy makers in both the public and private sectors have been concerned with the question: What is the impact of changes in federal R and D support on company-financed R and D expenditures? This is one of the first empirical studies at a micro level of this topic. The results, which pertain to energy R and D, indicate a complementarity between government-financed and company-financed R and D, on the average, although there is a considerable amount of interfirm variation in this regard. In about one-third of the projects studied, federally-financed R and D projects suggested some further R and D into which the firm invested its own funds. The results of a logit analysis suggest that whether or not a government-financed R and D project results in such a spinoff depends on the extent to which the performing firm contributes to the formulation of the project’s goals and strategies.

Dividend Policy and Market Valuation in British Industry

The objectives of the article are: firstly, to identify the principal factors which determine interfirm variation in dividend policy within the UK; and secondly, to examine the effect of dividend policy on company stock‐market valuation. This cross‐section empirical study is based on a random sample of 60 publiclyquoted British companies, and refers to the year 1970.The Lintner (1956) model is rejected, in that capital requirements and earnings risk are seen to play an important part in determining dividend policy. The ‘dividend neutrality’ hypothesis is strongly rejected once risk and profitability‐of‐retained‐earnings are taken into account.